The modern beer business is still a lot like the wild, wild west in that there is no clearly defined road map for growth and expansion. As the popularity of good beer continues to rise, and breweries search for ways to meet the ever-increasing demand, most producers are hustling to find creative ways to grow their businesses responsibly. Not just the little guys, but some of America’s bigger, better known breweries are making bold moves as they face an increasingly crowded business landscape.
Last week two of America’s more recognizable breweries announced that they have joined forces to become one of America’s largest beer producers. Southern Tier Brewing of Lakewood, New York has partnered with Victory Brewing of Downington, Pennsylvania to form Artisanal Brewing Ventures (ABV).
The new parent company is a private equity holding company. Based in Charlotte, North Carolina, ABV was formed by Southern Tier and the New York investment and private equity firm Ulysses Management. The deal is expected to close within the next 60 days.
The joint venture between Victory and Southern Tier creates one of the largest brewing companies in the Northeast region with the capacity to produce more than 800,000 barrels of beer annually. The two beer companies shipped a combined 250,000 barrels last year.
Victory Founder Bill Covaleski says they’re following the old adage “strength in numbers.” Each brewery will continue to operate independently, says Covaleski, while the parent company provides capital for investment and expansion.
“Coming together makes us a bigger producer. So it basically positions us better against the larger companies,” he says. “I think it’s also a defensive strategy. If you’re a small guppy and there’s a big shark swimming in the tank, you’re easily swallowed. If you’re a bigger fish, you’re better protected from the shark.”
“The beautiful thing is there should be no net effect to the consumer,” he says. “There’s really no benefit other than perhaps a wider distribution reach and stronger distribution penetration.”
Bill Covaleski and Ron Barchet founded Victory Brewing in 1996. Phin and Sara DeMink founded Southern Tier Brewing Company in 2002, selling part of their ownership to Ulysses Management within the last two years.